Demonitisation, coupled with its impact on the economy as a whole, had left a lot of borrowers with a shortage of funds to make repayments towards loans which would ideally have turned a lot of loans into NPAs. However, when the demonitisation was announced, the RBI had also made an announcement that those that had taken loans up to Rs.1 crore would be given an extension of 60 days to make repayments. Now that extension has been revised and increased by another 30 days bringing the total extension to 90 days. The extension is applicable to loans that were taken for business purposes, including agricultural loans. It is applicable to loans taken from banks and from Non Banking Financial Companies (NBFC).
What does this mean? This means that if you had taken a loan and had repayments due between November 1st 2016 and December 31, 2016, you could make them late without having the bank’s label your account as a Non Performing Asset. The conditions for this announcement are that this is applicable only for loans up to Rs.1 crore and it is only meant to defer the classification of standard assets as an NPA. Observations had been made that pointed out that many people were left handicapped by a lack of available currency and limited withdrawal limits of Rs.24,000 as a result of demonitisation. It was also noticed that some of the borrowers were also creditors who had not been able to receive payments as those that had borrowed from them were unable to access funds to make repayments.